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Graco (GGG) Exhibits Strong Prospects, Headwinds Persist

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Graco Inc. GGG stands to benefit from strong demand for its products, sound customer base and strong global presence. In the first quarter of 2021, the company’s sales from the Americas, the Asia Pacific and the Europe, Middle East and Africa regions expanded 18%, 30% and 25%, respectively, on a year-over-year basis. Also, the company’s focus on investing in product innovation and capacity expansion bodes well. It plans to invest $140 million to roll out machinery and equipment in 2021, including $90 million for the expansion of facilities.

Graco’s healthy liquidity position is likely to be advantageous in the quarters ahead. For instance, exiting the first quarter of 2021, it had cash and cash equivalents of $460.6 million, reflecting a 21.6% increase from $378.9 million recorded in the previous quarter. Its long-term debt was just $150 million.

The company remains focused on rewarding shareholders through dividend payments. In first-quarter 2021, it used $31.6 million for paying out dividends, reflecting an increase of 7.9% year over year. The quarterly dividend rate was hiked by 7.1% in December 2020.

However, the company expects that businesses in certain geographies and end markets might be challenged owing to demand and supply-chain-related uncertainties. In addition, escalating costs and expenses remain a major concern for the company. In the first quarter, its cost of sales recorded an increase of 18.2% on a year-over-year basis whereas operating expenses increased 9.4%. For 2021, Graco expects unallocated corporate expenses of $30 million.

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Year to date, this Zacks Rank #3 (Hold) stock has returned 8.3% compared with the industry’s growth of 7.6%.

Stocks to Consider

Some better-ranked stocks from the same space are Chart Industries, Inc. GTLS, Nordson Corporation NDSN and RBC Bearings Incorporated ROLL, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Chart Industries delivered an earnings surprise of 8.82% in the last reported quarter.

Nordson delivered an earnings surprise of 28.48% in the last reported quarter.

RBC Bearings delivered an earnings surprise of 0.93% in the last reported quarter.

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Graco Inc. (GGG) : Free Stock Analysis Report

Nordson Corporation (NDSN) : Free Stock Analysis Report

Chart Industries, Inc. (GTLS) : Free Stock Analysis Report

RBC Bearings Incorporated (ROLL) : Free Stock Analysis Report

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